Question

Following are the balance sheets of Reddy Limited as on 31 March, 2011 and 2012

| Liabilities | Rs.2011 | Rs.2012 | assets | Rs.2011 | Rs.2012 |
| share capital | 2,400 | 3,600 | lands and buildings | 1,620 | 1,040 |
| Reserves and suplus | 1,872 | 2,124 | plant and machinery | 1,860 | 4,716 |
| Debentures | 300 | 600 | furniture and furniture and ffixtures | 54 | 108 |
| long term debt | 900 | 1,530 | others fixed assets | 120 | 180 |
| Bills payable | 1,530 | 702 | long term loans | 276 | 354 |
| othe current liabilities | 42 | 60 | cash and bank balance bill | 1,254 | 1,120 |
| | | | Receivable stock | 960 | 780 |
| | | | prepaid expenses | 18 | 18 |
| | | | other current assets | 174 | 240 |
| | 7,044 | 8,616 | | 7,044 | 8,616 |

Analyse the financial position of the company with the help of the Common Size Balance Sheet.

Answer 1

Comments

(i) Inspite of decrease in current assets and current liabilities, the current ratio has improved.

(ii) Decrease in cash and bank balance indicates that there will be delay in payments.

(iii) Increase in fixed assets and share capital shows that assets are purchased with long term sources of finance.